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36 million drivers face insurance hike after 'bizarre' payout change

Millions of drivers could see insurance premiums rise by more than 10% following a Government decision to change the way personal injury compensation is calculated.

The decision by Lord Chancellor Liz Truss to cut the ‘Ogden’ discount rate was described as ‘bizarre’ by the RAC and ‘crazy’ by the Association of British Insurers (ABI).

The decision affects accidents causing 'life changing' injuries

RAC Insurance director Mark Godfrey said the move would increase the compensation awarded in every case of life-changing injury and, combined with 2% added to insurance premium tax in June ‘means that motorists are likely to see their premiums increase by 10%'.

'Some parts of the market, notably younger and older drivers, may see substantially higher increases,' he added.

He said: ‘It is a bizarre decision from the Government to make the first adjustment to the Discount Rate in 16 years at the very same time as they have effectively admitted the current system is flawed by announcing a consultation on finding a better and fairer framework for handling life-changing personal injury pay-outs.'